Troubled Legacy of COAH Could Cost NJ Towns $161 Million

Colleen O'Dea | July 12, 2012
Can last-minute legal appeal stop the state from raiding the affordable housing trust fund?

One municipality has $400,000 in contracts to rebuild deteriorated housing and convert an abandoned school. Another has plans for 151 units, including some for very low-income special-needs adults. A third is collaborating with other state agencies on a supportive housing project.

None of these municipalities, nor any other in New Jersey, knows if its plans are sufficient to stop the state from taking $161 million in affordable housing trust fund money held for the communities to build low- and moderate-income units. In fact, Gov. Chris Christie’s 2013 budget was counting on as much as $200 million coming from local housing funds — and the deadline for the first funds transfer is July 17.

That explains why the Fair Share Housing Center and New Jersey State League of Municipalities will be in Newark tomorrow before the Appellate Division of Superior Court, seeking to stop the state from transferring that money into the general fund until the Council on Affordable Housing defines what municipalities have to do to keep the money.

“It’s basically a commonsense thing,” said Adam Gordon, a Fair Share attorney. “It’s been infuriating. Even when people are doing everything they can, they’re asking questions of COAH and the Christie administration, they [COAH and Christie] won’t answer. We figured we had to go to court.”

Three Little Words

At issue is the definition of the term “commit to expend.”

The 2008 law that rewrote the state’s affordable housing rules specified that any money in municipal housing trust funds was subject to seizure by the state if a community did not “commit to expend” that money within four years.

Gordon and attorneys for the League of Municipalities say that the 2008 law required COAH to write rules explaining what “commit to expend” means. COAH officials pledged to do so in letters sent to mayors shortly after the law was signed. But they never did.

Making this all the more byzantine is the status of the council itself. Christie abolished COAH in June 2011, but an appeals panel ruled earlier this year that he did not have the power to do so. The administration is appealing that decision and the council has not met in close to a year.

In its brief, filed yesterday, the state contends that municipalities “have routinely spent and committed to expend moneys” and they know exactly what that means.

Deputy Attorney General Geraldine Callahan writes that municipalities only have themselves to blame for not committing to spend the money, and that is something lawmakers saw and tried to counter when passing the 2008 law.

“Some municipalities proved far more willing to collect development fees and pad their trust funds than to spend them on affordable housing within their borders,” the state contends.

But Fair Share argues that COAH has instead been sending mixed messages to municipal officials. For instance, a COAH resolution endorses Montclair’s plan to spend $2.9 million in trust fund money, but the following page states that “this spending plan approval shall not be deemed a ‘commitment to expend’ within four years” as required by law.

“Developers of low- and moderate-income housing and municipalities throughout New Jersey find themselves trapped in an Orwellian process,” its brief states. “Such a bureaucratic game would be cruel — and violate basic due process — under any circumstance. It is particularly problematic given the practical impacts. For many years, many lower-income households — from disabled veterans in Chester Township to families in West Windsor Township to senior citizens in Florence Township — have waited for housing opportunities now on the verge of occurring, based on funding from the trust funds.”

A Question of Clarity

Why the delay?

The state would likely contend that these towns had no intention of spending the money and creating the housing in the first place. But both Fair Share and the league offer another explanation: The municipalities have been in limbo, uncertain as to what constitutes “commit to spend,” and so they have done nothing, waiting for clarity.

They also have been waiting for the state Supreme Court to issues a final decision on COAH’s so-called third-round regulations. These rules specified how many affordable units each town had to provide to meet its obligation under the Fair Housing Act of 1985. Acting on another case brought by Fair Share, the appellate division invalidated the third-round regulations.

Gordon said that the appeal of that ruling, which dates back to 2010, is the oldest unargued case currently before the state’s highest court. And it is unlikely to be heard before September, since the Supreme Court has recessed for the summer.

Legislators also sought to intervene on behalf of municipalities, both passing a bill giving towns two additional years to spend the money and inserting language into the budget allowing communities to keep any funds for which they had passed a resolution stating the intent to spend them. Christie vetoed both.

The money itself comes from fees municipalities assess against developers each time they build something. The law allowing them to do so has been in place since shortly before the enactment of the FHA. According to COAH data, more than 200 municipalities have collected $589 million in fees and spent about $337 million through June 5. Of the $252 million remaining, $161 million is at risk of seizure on July 17.

Before the 2008 law was enacted, a municipality had four years after COAH approved its spending plan in which to spend the money or it would revert to the New Jersey Affordable Housing Trust Fund, which was to use the money to create housing in the same region. The revision to the FHA stated a municipality had to “commit to expend” money within four years from the date of its collection or transfer the money to the state trust fund. Again, municipalities argue that they couldn’t spend the money within four years since they were waiting COAH’s guidance.

But the Department of Community Affairs’ response to questions from the Office of Legislative Services about its budget said that the trust fund money would be transferred instead to the general fund to be used for a number of “housing support” services but primarily not to build affordable units.

“While none of the appropriations is explicitly or exclusively for construction and rehabilitation of affordable housing, some of the appropriations … could be used for such purposes,” according to the DCA.

In Brief

Fair Share’s brief states COAH sent a letter to mayors in July 2008 promising regulations defining that term but the council never delivered.

The state’s brief denies that COAH was required to write rules, stating the Legislature “used the term in its plain meaning,” that being “an enforceable agreement.”

Municipalities tried to spend the money “but were stymied by their inability to get any clarity on what they needed to do to ‘commit’ the funds,” according to the brief.

The league’s brief included some specific instances of municipal proposals:

  • Pemberton has $400,000 in contracts to rebuild deteriorated units and build affordable housing on an abandoned elementary school site.
  • South Brunswick has plans for 131 new units and 20 more for very low-income special-needs adults for a total cost of $7.6 million.
  • Rochelle Park has been working with two other state agencies on a special-needs housing project and has earmarked $422,000 for it.
  • And Mount Olive wants to deed-restrict two properties for Morris County Habitat for Humanity to build low- and moderate-income homes, as well as contribute $100,000 toward the housing.
  • “COAH failed even to propose, much less adopt regulations,” according to the league’s brief. “Municipalities do not know the ‘rules of the game’ and cannot act with any assurance.”

    If the state is allowed to take the money, the league predicts municipalities en masse will take the state to court to try to get the money back. Already Marlboro won a temporary injunction in Superior Court to stop the state from taking $11.7 million from its fund balance. That case is also scheduled for a hearing tomorrow.

    Callahan writes in the state’s brief that “municipalities that disagree with COAH’s determination of what trust funds moneys are committed by a legally enforceable agreement” can go to court to make their case.

    More than the $161 million that was collected four years ago is at stake. The league states that the 2008 law set a “rolling deadline,” meaning as fees “will become at risk each day thereafter as that money becomes four years old.”

    Further, the league says that municipalities will need those funds once the state Supreme Court issues a final decision on COAH’s third-round regulations.

    A year ago, Christie reorganized the DCA and abolished the council, transferring its duties to the office of Local Planning Services. But earlier this year, Fair Share won another appellate ruling and the court ordered the reinstatement of COAH because Christie did not have the authority to get rid of it.

    The Ghost Agency

    However, COAH remains a ghost agency.

    An online search for the council continues to lead to a page called Fair Housing Act Administration that states COAH “has been eliminated effective August 29, 2011.” It states that all inquiries be directed to LPS.

    When asked about the status of the council, its members, its operations, and its meetings, DCA spokeswoman Tammori Petty replied, “DCA has no comment on the Council on Affordable Housing.”

    Gordon said the council’s rules for operating allow staff to review and approve plans and that has been occurring. But he said the council’s seven-member board has not met since the decision. Its chairman is the DCA commissioner and he has not called a meeting.

    Policy matters, including the definition of a term like “commit to expend,” would have to be decided by the council, Gordon said.

    “Presumably it’s politics,” he said. “They don’t want to meet.”

    The appellate court has pledged to rule on the matter prior to the July 17 deadline.